Shares of Delivery Hero fell sharply on Monday after the company, which is based in Germany and delivers food, said it would start treating its Spanish riders like workers.
It was announced today that Glovo has chosen to switch its delivery riders in Spain from working as freelancers to full-time employees. This is to avoid more legal uncertainty that could lead to more problems, the company said in a statement.
Glovo is the Spanish name of Delivery Hero. The company said it expects a €100 million ($105 million) effect on its adjusted earnings before interest, taxes, depreciation, and amortisation for the fiscal year 2025.
FactSet asked analysts and found that they think EBITDA will be €1.15 billion in 2025.
It also expects to get “reclassification decisions for alleged misclassification” of its delivery drivers in Spain, which is another word for “fine.”
In local trade, Delivery Hero DHER -11.23% stock fell more than 8%.
In 2021, Spain passed a law called “rider law” that said delivery companies had to hire riders directly instead of hiring freelancers. Reuters says that Glovo was fined €79 million in 2022 for allegedly breaking labour laws and then another €56.7 million in January 2023 for the same reason.
Clément Genelot, an equity researcher at Bryan, Garnier & Co., said that Delivery Hero’s move to Spain could cost the company up to €870 million, which includes about €770 million in costs like paying into social security.
Genelot wrote in an email to MarketWatch, “It explains why Delivery Hero decided to upsize the Talabat IPO, which was a surprise.” Last week, the German company raised the price of its Middle East unit shares by 15%. The unit is set to begin selling in Dubai on December 10. It thinks that the sale will bring in up to $2 billion.
“All in all, Delivery Hero’s debt will not go down as much as was hoped.” Net debt to earnings may not drop below 2x by the end of 2025. The legal approval to sell Taiwan is now important for lowering the balance sheet even more. “The good thing is that it finally makes things clear about Spain, which has been a problem for a while along with Southeast Asia and high debt,” the expert said.
